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Ezone program 101

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  • 1. Enterprise Zone Program 101
  • 2. What is an Enterprise Zone? Is a defined area in which businesses can claim certain state income tax savings and other advantages. These zones were created in California to stimulate business investments in areas where investment has decreased and to make jobs available in areas of high unemployment.
  • 3.
    • The San Diego Regional Enterprise Zone is comprised by the following areas: Otay Mesa, San Ysidro, significant portions of Chula Vista, National City and the Downtown area.
  • 4. Benefits
    • Net interest deduction for lenders
    • Sales tax or use tax credit
    • Employee hiring credit
  • 5. Net interest deduction for lenders:
    • A deduction from income is allowed on the amount of net interest earned on loans made to a trade or business located in an enterprise zone
  • 6. Sales or use tax credit
    • Enterprise Zone Businesses may reduce taxes by the amount of sales or use tax paid on certain property purchased for exclusive use in an enterprise zone. Qualified property is machinery, machinery parts, data processing and communication equipment, (phones, computers, fax machines, copy machines, etc.)
  • 7. HIRING CREDIT
    • Allowed to qualified employers who hire qualified employees.
    • Reduce state taxes by a a percentage of qualified wages paid to one or more qualified employees over a five-year period on enterprise zone income.
    • Potential $37,000 credit per eligible employee
  • 8. Credit computation:
    • Qualified wages X 50% (1st yr of employment)
    • Qualified wages X 40% (2nd yr of employment)
    • Qualified wages X 30% (3rd yr of employment)
    • Qualified wages X 20% (4th yr of employment)
    • Qualified wages X 10% (5th yr of employment)
  • 9. Qualified Employee is any of the following at the time of hire:
    • Resident of Targeted Employment Area (TEA)
    • Economically disadvantaged individual (14 yrs. or older)
    • Dislocated worker
    • Vietnam, disabled, or recently separated military veteran
    • Ex-offender
    • Public Assistance
    • federal Work Opportunity Tax Credit WOTC
    • Native American
    • Disabled individual
  • 10. (AB1452):
    • If net business income is over five hundred thousand dollars ($500,000), the company may only use 50% of the Enterprise Zone Credits.
  • 11. Examples
    • Company “A”
    • 3 employees
    • 2 Qualified
    • $31,000 Identified credits
    • $8,000 Refund (Taxes Paid in ’06 and ’07) / $23,000 Carried forward
    • Company “B”
    • 15 employees
    • 8 Qualified
    • $111,000 Identified credits
    • Will use all the credits since they have paid more than that amount in state taxes in the past 4 yrs.
  • 12. For more information:
    • Refer to CA Franchise Tax Board’s
    • 3805z Booklet & Form
  • 13. Service Fee:
    • Chamber Members:
    • 10% of Identified credits/Refund
    • Non-Members: 12%
    • Independent Consultants:
    • 15% - 25%
  • 14. Contact us
    • Otay Mesa Chamber of Commerce
    • 9163 Siempre Viva Rd., Suite I-2
    • San Diego, CA 92154
    • (619) 661-6111
    • [email_address]
    • www.otaymesa.org